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Commitments And Contingencies
 12 Months Ended
Dec. 30, 2011
Commitments And Contingencies [Abstract]  
COMMITMENTS AND CONTINGENCIES

14. COMMITMENTS AND CONTINGENCIES

 

Litigation – The Company is a party to various legal actions arising in the normal course of business. The majority of these claims are employment related matters with former employees of the Company. While the Company does not believe that the ultimate resolution of any individual pending action will have a material effect on its results of operations, financial position, or cash flows, litigation is subject to inherent uncertainties. If an unfavorable ruling(s) were to occur, there exists the possibility of a material impact in the period in which the ruling occurs.

 

Previously reported - in 2002, a former Electrochem customer, Input/Output, Inc., now known as ION Geophysical Corporation (“Input/Output”), commenced an action against the Company. After trial in September 2009, a jury found in favor of Input/Output on fraud, unfair trade practices and breach of contract claims and awarded damages in the amount of $21.7 million. The final judgment in the matter included an award of prejudgment interest bringing the total judgment to approximately $33 million. During 2009, the Company accrued $34.5 million in connection with the Electrochem Litigation. The Company's post-trial motion for a new trial was denied, and the Company appealed the judgment to the Louisiana Court of Appeal. In December 2010, the Company entered into a settlement agreement with Input/Output. Under terms of this agreement, Input/Output released the Company of any liability in connection with the jury verdict and in return for that release, the Company paid Input/Output $25 million. In the fourth quarter of 2010, the Company recognized a gain for the remaining $9.5 million of the previous accrual.

 

License agreements – The Company is a party to various license agreements for technology that is utilized in certain of its products. The most significant of these agreements are the licenses for basic technology used in the production of wet tantalum capacitors, filtered feedthroughs and MRI compatible lead systems. Expenses related to license agreements were $2.8 million, $2.5 million and $3.3 million, for 2011, 2010 and 2009, respectively, and are included in Cost of Sales.

Product Warranties – The Company generally warrants that its products will meet customer specifications and will be free from defects in materials and workmanship. The Company accrues its estimated exposure to warranty claims based upon recent historical experience and other specific information as it becomes available.

 The change in product warranty liability was comprised of the following (in thousands):
        
  Year Ended 
  December 30, December 31, 
  2011 2010 
 Beginning balance$2,313 $1,330 
 Warranty reserves acquired 210  0 
 Additions to warranty reserve 375  2,237 
 Warranty claims paid (887)  (1,285) 
 Foreign currency effect 2  31 
 Ending balance$2,013 $2,313 

Operating Leases – The Company is a party to various operating lease agreements for buildings, equipment and software. The Company primarily leases buildings, which accounts for the majority of the future lease payments. Lease expense includes the effect of escalation clauses and leasehold improvement incentives which are accounted for ratably over the lease term.

 Operating lease expense was as follows (in thousands):
  Year Ended
  December 30, December 31, January 1,
  2011 2010 2010
 Operating lease expense$2,704 $3,114 $3,443

 Minimum future estimated annual operating lease expense are as follows (in thousands):
     
 2012$3,347 
 2013 2,832 
 2014 2,849 
 2015 2,466 
 2016 2,305 
 Thereafter 2,895 
 Total estimated operating lease expense$16,694 

Self-Insured Medical Plan – Beginning in 2010, the Company began self-funding the medical insurance coverage provided to its U.S. based employees. The risk to the Company is being limited through the use of stop loss insurance, which has an annual deductible of $0.2 million per covered participant. The maximum aggregate loss (the sum of all claims under the $0.2 million deductible) is limited to $14.2 million with a maximum benefit of $1.0 million. As of December 30, 2011 and December 31, 2010, the Company had $1.6 million and $2.1 million accrued, related to the self-insurance of its medical plan, respectively. This accrual is recorded in Accrued Expenses in the Consolidated Balance Sheet, and is primarily based upon claim history. For 2012, the maximum aggregate loss limit was lowered to $13.5 million.

 

Purchase Commitments – Contractual obligations for purchase of goods or services are defined as agreements that are enforceable and legally binding on the Company and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Our purchase orders are normally based on our current capital and manufacturing needs and are fulfilled by our vendors within short time horizons. We enter into blanket orders with vendors that have preferred pricing and terms, however these orders are normally cancelable by us without penalty. As of December 30, 2011, the total contractual obligation related to such expenditures is approximately $31.6 million and will primarily be financed by existing cash and cash equivalents, cash generated from operations, or the 2011 Credit Facility over the next twelve months. We also enter into contracts for outsourced services; however, the obligations under these contracts were not significant and the contracts generally contain clauses allowing for cancellation without significant penalty.

Foreign Currency Contracts – The Company has entered into forward contracts to purchase Mexican pesos in order to hedge the risk of peso-denominated payments associated with the operations at its Tijuana, Mexico facility.

 Reduction in Cost of Sales related to the Company’s forward contracts are as follows (in thousands):
  Year Ended 
  December 30, December 31, January 1, 
  2011 2010 2010 
 Reduction in Cost of Sales$556 $483 $559 
 Ineffective portion of change in fair value 0  0  0 

 Information regarding the Company's outstanding foreign currency contracts as of December 30, 2011 is as follows (dollars in thousands):
      Aggregate           
   Type of  Notional Start End   Fair Balance Sheet
 Instrument Hedge  Amount Date Date Pesos/$ Value Location
 FX Contract Cash flow $6,000 Jan-12 Dec-12 13.0354 $(486) Accrued Exp
 FX Contract Cash flow $4,200 Jan-12 Dec-12 14.0287  (52) Accrued Exp
              $(538)  

Workers' Compensation Trust – The Company was a member of a group self-insurance trust that provided workers' compensation benefits to employees of the Company in Western New York (the “Trust”). Under the Trust agreement, each participating organization has joint and several liability for Trust obligations if the assets of the Trust are not sufficient to cover those obligations. During 2011, the Company was notified by the Trust of its intentions to cease operations at the end of 2011 and was assessed $0.6 million as an estimate of its pro-rata share of future costs related to the Trust. This amount was accrued and paid in 2011. Based on actual experience, the Company could receive a refund or be assessed additional contributions for workers' compensation claims. Beginning in 2012, the Company will utilize traditional insurance to provide workers' compensation benefits.